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Strategic Hiring Decisions: Maximize Marginal Revenue Product

Explore the interconnectedness of product and factor markets in determining optimal labor hiring for Acme Yo-Yo Company. Learn how to maximize revenue by strategically hiring workers based on marginal revenue product analysis.

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Strategic Hiring Decisions: Maximize Marginal Revenue Product

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  1. Activity 44 marginal revenue product How many workers should be hired?

  2. As firms, in the products market, we thought on the margin in terms of the additional revenue from an additional unit of output: TR/1 As firms, in the factor market, we’ll again think on the margin but in terms of the additional revenue from an additional unit of input: TR/1 The interconnectedness of the two markets

  3. Acme Yo-Yo Company produces supersonic yo-yos in a competitive products market. It can produce as many as it wants, charging $2 each. In the competitive labor market, it can hire as many workers as it wants, paying each $30 a day. How many workers should Acme hire?

  4. Acme Yo-Yo Company produces supersonic yo-yos in a competitive products market. It can produce as many as it wants, charging $2 each. In the competitive labor market, it can hire as many workers as it wants, paying each $30 a day. How many workers should Acme hire?

  5. Acme Yo-Yo Company produces supersonic yo-yos in a competitive products market. It can produce as many as it wants, charging $2 each. In the competitive labor market, it can hire as many workers as it wants, paying each $30 a day. How many workers should Acme hire?

  6. If the demand for Acme’s yo-yos increases, so that Acme can sell as many yo-yos as it wants for $3 each; • What effect will this have on Acme’s level of employment?

  7. If the demand for Acme’s yo-yos increases, so that Acme can sell as many yo-yos as it wants for $3 each; • What effect will this have on Acme’s level of employment?

  8. A firm should hire another worker as long as the marginal revenue product is not exceeded by her or his wage • If the demand for Acme’s yo-yos increases, so that Acme can sell as many yo-yos as it wants for $3 each; • What effect will this have on Acme’s level of employment?

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